Reduced hours then made redundant — do they pay you out on the old or new hours?

Redundancy pay under s.119 of the Fair Work Act 2009 is calculated as a number of weeks of pay, where a "week" means the employee's "ordinary hours" of work at their base rate of pay. The Act doesn't say which ordinary hours — most recent or historical — so when an employer has reduced your hours in the lead-up to redundancy, this is genuinely contested ground.

In most cases the employer's payroll system will simply use the current ordinary hours — the lower figure — because that's what's loaded into the system on the date of termination. But this isn't always the legally correct answer, especially where the hours reduction was involuntary or recent.

Approach 1 — current ordinary hours. Use whatever ordinary hours are in place at the date of termination. This is the most administratively simple and is what most payroll systems default to. It favours the employer when hours have recently been cut.

Approach 2 — substantive ordinary hours. Look at the established pattern of work — typically a 12-month look-back — and use the average. This is supported by Fair Work Commission decisions where a reduction in hours was imposed by the employer or arose from circumstances beyond the worker's control (for example, a temporary medical accommodation, a workload restructure, or a mutual variation that was always intended to be revisited).

The second approach has been applied in cases such as those involving full-time workers temporarily reduced to part-time who were then made redundant. The reasoning: the redundancy provisions are meant to compensate for the loss of the employment relationship, not just the diminished version of it on the day the role was cut.

Your position is strongest when:

• The hours reduction was initiated by the employer, not requested by you.
• The reduction was meant to be temporary — for health, restructure trial, or business downturn — and there's correspondence or a return-to-work plan implying you'd resume previous hours.
• The reduction was recent relative to your length of service (e.g. you worked 38 hours for nine years and 30 hours for the last few months).
• You can show a consistent pattern of higher ordinary hours over the bulk of your service.

Your position is weaker when the reduction was your idea, has been in place for years, or was formalised as a permanent contract variation.

Take a real-world pattern: ten years at 38 hours a week, then a stress-related reduction to 30 hours a week for the past four months, then a redundancy. The employee has worked at the lower hours for less than 4% of total service.

Using the current-hours approach with the standard NES scale (12 years' service → 11 weeks): 30 hrs × 11 weeks = 330 ordinary hours' pay.

Using the historical-average approach (weighted across the full service): roughly 37.7 hrs × 11 weeks = 415 ordinary hours' pay.

That's about a 25% difference. On any reasonable base rate, this is a five-figure swing in redundancy pay.

1. Get the redundancy calculation in writing from the employer or its payroll provider, including the hours figure they used.
2. Write a brief, factual response noting your length of service, the recent change in hours, and the reason for the change. State that the redundancy entitlement should be calculated on substantive ordinary hours under s.119, not the recently varied figure.
3. Provide evidence — old contracts, prior payslips, emails about the temporary nature of the reduction, any return-to-work plan.
4. Cite the legal position: s.119 doesn't specify the date of measurement, and FWC and Federal Court decisions have applied the substantive-hours approach where the reduction was employer-initiated or temporary.
5. If the employer refuses, lodge a small claim in the Federal Circuit and Family Court of Australia for the difference. Small-claims under the Fair Work Act are capped at $100,000 and don't require legal representation.

If your employer has fewer than 15 employees (the small-business threshold), no redundancy pay is owed under the NES at all. This is the same regardless of which hours were used — the entitlement just doesn't apply. Your only path to redundancy pay in that situation is if your employment contract, an enterprise agreement, or a relevant Modern Award provides for it. Some awards do. The redundancy calculator walks through this.

If your employer is not a small business and they're claiming the small-business exemption, count carefully — associated entities, contractors actually doing employee work, and labour-hire arrangements all get scrutinised in disputes about the headcount.

Run the redundancy calculation with the higher historical hours figure in our redundancy pay calculator, then again with the current lower figure. The gap is what's at stake. Use the notice period calculator for the parallel notice question — notice is also tied to ordinary hours and gets the same scrutiny.